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EDITOR'S BLOG
May 21, 2014

Time to squash the flat organization

3, no make that 4, reasons not to gut middle managers
    

By Todd Humber

There’s an old saying in journalism that two is a coincidence but three is a trend.

So far I only have evidence of a coincidence, but two friends of mine in supervisory roles at different organizations in Ontario have recently gone through restructurings that left them with zero direct reports.

The policies were slightly different but essentially they were blanket decisions — cast down from above — that if you didn’t have a certain number of direct reports, then all your employees would instead report directly to your boss.

The moves were done under the guise of creating more nimble firms but my friends are skeptical — in both cases, employees felt cost-cutting was the real culprit as some managers were let go in the shuffle.

My two friends aren’t exactly complaining — anyone who has ever been in a management role has no doubt pined for the halcyon days of zero direct reports. But from a wider organizational and HR policy view, there are some serious flaws to making a blanket decision like "Anyone with fewer than 10 direct reports will no longer be in a supervisory role."

Here are three reasons why this practice should be put to pasture.

Blanket rules bad

Arbitrary blanket rulings handed down from above almost always cause unforeseen problems in the real world. They may sound great at the boardroom table but when they trickle down and are put into practice on the front line, there can often be unintended consequences.

After all, not all roles are created equal. Yes, some managers could potentially handle 50 direct reports if the workers’ roles are simple. But some employees require much more hands-on management, and having any more than a half-dozen direct reports could quickly become unmanageable.

And not all employees — or managers — are created equal. Some workers are great at their jobs but require a bit of micromanaging. Some managers who are incredibly effective with a team of five could be overwhelmed and ineffective if that number swelled due to a policy change.

The next generation

We’ve already heard plenty of chatter about a lack of management and leadership skills from the next generation of workers. But if we pull direct reports away from front-line supervisors and middle managers — many of whom are gen-X and gen-Y workers — who is going to have the leadership experience to replace the retiring boomers?

Middle management has always been a favourite area to gut when times get tough, but if organizations aren’t giving the next generation of leaders some experience in managing employees, a lot of firms are going to struggle to fill the leadership pipeline in the coming decades.

If you’re gutting your supervisory and management ranks, you’ll know where to point the finger of blame a decade or so down the road when you can’t find competent leaders.

Performance management

If we believe in the merits of performance management — and we had better — then the question has to be raised: How many credible performance reviews can a manager actually complete?

Five seems manageable, 10 is certainly within the realm of possibility. But if you’re conducting 30, 40 or 50 reviews, how effective are you actually being? At that point, the review will inevitably become an impersonal rubber stamp. Yep, the reviews are done — but nobody benefitted.

We’ve written a lot of stories over the years in the pages of Canadian HR Reporter about the importance of performance management, of identifying and nurturing high performers and helping weaker performers evolve into solid employees.

Many firms have embraced the notion of pay for performance but if the underlying identifier — the performance review — is receiving only lip service, then the philosophy is meaningless.

The 4th reason

There’s actually a fourth reason to abandon the practice, but I stole it from Julie Wulf, an associate professor at Harvard Business School in Cambridge, Mass. In 2012, Wulf penned The Flattened Firm: Not as Advertised, a 22-page report that looked at the experience of roughly 300 large U.S. firms over a 15-year period.

Her conclusion? Flattened firms don’t actually achieve their goal. While the rationale for flattening firms seems sound — pursuing a streamlined, efficient organization that can respond more quickly to customers — the reality has proven otherwise, said Wulf.

Firms that pursued a flat strategy actually concentrated more power at the top, rather than pushing decisions downward — so much for the goal of empowering individual employees. CEOs in flattened organizations also tended to spend a lot more time allocated to internal interactions.

"Taken together, the evidence suggests that flattening transferred some decision rights from lower-level division managers to functional managers at the top," said Wulf. "Firms may flatten structure to delegate decisions but doing so can have the opposite effect and lead to unintended consequences for other aspects of internal governance."

The evidence shows flattened hierarchies don’t work, they’re creating potential problems down the road and they’re undermining proper performance management.

Here’s hoping this coincidence doesn’t turn into a trend.

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